California’s single-payer bill could save billions, new report states

The Healthy California Act would create a separate health care system for the state. If approved, California would have to apply for an "Innovation Waiver," which, under the Affordable Care Act, can allow states to propose their own innovative strategies to health care.

The study, conducted by a team of economists at the Political Economy Research Institute at the University of Massachusetts Amherst and led by Dr. Robert Pollin, was released late last month, just before the California Senate voted to advance Senate Bill 562, the Healthy California Act, on Thursday.

SB-562, Pollin’s study says, would significantly cut current spending on health care in California, something Nevada County single-payer advocates suggested when a state Senate committee last month estimated the cost at $400 billion.

Those savings, according to the study, would come from reduced costs on administrative expenses, pharmaceutical pricing and fee structures for service providers. It would also save money through addressing inefficiencies in the current system, including unnecessary services, inefficiently delivered services, missed prevention opportunities and fraud.

"SB 562 will push tax rates up beyond imagination, making us tax serfs to the state, and driving hundreds of thousands of jobs out of California."

— Sen. Ted Gaines

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The study concludes that California’s current health-care system costs the state $368.5 billion annually, or 14.2 percent of its 2016 GDP, and covers 33.4 million people. The remaining 2.7 million California residents, it says, are uninsured. But of the 92.5 percent of state residents who have health insurance, 36 percent of those, about 12 million individuals, are underinsured — a term the study defines as “people whose health insurance provisions include high deductibles and/or large out-of-pocket expenses.”

In order to provide high-quality health care to all California residents under the current system’s model, the state would have to increase overall spending on health care by 9.6 percent for a total cost of $404.1 billion, according to Pollin’s study. That figure is in line with the Senate Appropriations Committee’s cost analysis, announced May 22, which projected SB-562 would cost the state $400 billion.

But when the savings a single-payer system would create are included, advocates say, the overall costs of the full-coverage system would be about 10 percent less than the existing system, the study estimates, and would therefore cost $331 billion.

‘A GREAT DEAL?’

“Not only would SB-562 cost less, but it would cover everyone with no premiums, no deductibles and no co-pays, and it would include dental and vision care,” said Mindy Oberne, chair of Nevada County’s chapter of Health Care for All California. “For $30 billion less, we’re getting everyone covered with much better care. It’s a great deal.”

A combination of state and federal funds already pays for $225 billion of California’s health care costs, according to Pollin’s economic analysis. The remaining $106 billion needed to foot the projected $331 billion price tag would be funded by a 2.3 percent sales tax and a 2.3 percent tax on gross receipts for businesses. A business that makes less than $2 million annually would be exempt from the tax, however.

“If a businesses grosses under $2 million, they would be getting all of their employees covered and not spending a dime,” Oberne said. “Even big businesses would be paying less than what they’re currently paying for insurance, even though they’d have the 2.3 percent tax.”

State Sen. Ted Gaines, R-El Dorado, who represents western Nevada County, voted against the bill and said it would cause dramatic increases in the tax burden of Golden State residents.

“Are you ready for California to double your taxes? What about triple or quadruple them?” Gaines said a news release. “SB 562 will push tax rates up beyond imagination, making us tax serfs to the state, and driving hundreds of thousands of jobs out of California.”

“To put it in context, this year’s entire general fund state spending — including roads, schools, universities, prisons and more — is estimated around $124 billion,” Gaines stated. “In a highly-taxed state that just recovered from years of massive deficits and still teeters on the edge of fiscal ruin, where is this additional taxpayer money supposed to come from? Four hundred billion is more than $10,000 a year from every man, woman and child in the state. Do most California families have that kind of money laying around?”

‘THE WHOLE PICTURE’

Pinky Zalkin, a Nevada County resident and proponent of SB-562, said people aren’t seeing the whole picture when they talk about the $400 billion price tag reported by the Senate Appropriations Committee.

“The Appropriations Committee doesn’t look forward with their study,” she said, “they’re looking in the rearview mirror. Yes, there will be higher taxes, but in the end people are coming out ahead.”

Zalkin said she thinks the bill will pass eventually, despite some media reports calling it a “long-shot.”

“We’re on a collision course here,” she said. “We cannot sustain the catastrophically rising costs of health care. The tentacles of not having an appropriate health-care system are very far reaching, and one way or another, we’re all paying for it.”

SB-562 will next move on to the state Assembly, where it will be heard by both the health and appropriations committees before a full Assembly vote.